Tuesday's settlement resolves some of the biggest claims against the U.S. estate, including that it allegedly short-changed a pension in Britain. The agreement does not affect a looming fight over how to divide the billions in cash among insolvency and bankruptcy proceedings in different countries.

The Canadian estate has claimed it should get the lion's share of that cash because Nortel's intellectual property was developed in Canada, a claim disputed by the other estates. A trial is scheduled for May.

A side agreement in Tuesday's settlement pledges that Nortel's U.S. and European estates will work together to try to form a common position on dividing the pile of cash ahead of the May trial.

Gross, the Delaware bankruptcy judge, overruled an objection to Tuesday's settlement from the Canadian estate, which argued that the side agreement might be used to change the trial protocol.

"Courts should encourage the parties to try to sit down and settle," he said.

The case is In re Nortel Networks Inc, U.S. Bankruptcy Court, District of Delaware, No. 09-10138